Wheaton Precious Metals’ Q2 Earnings Rise 9 Percent

Wheaton Precious Metals’ (TSX:WPM,NYSE:WPM) second-quarter results show a 9-percent increase in adjusted net earnings and an 8-percent increase in cashflow from operations, the company announced on Tuesday (August 14).

The world’s largest precious metals streaming firm reported higher revenue as a result of more gold ounces being sold at a higher average price, which led to adjusted net earnings of US$73 million and cashflow from operations of US$125 million.

“Wheaton’s high-quality portfolio and strong margins generated over US$260 million of operating cash flow in the first half of 2018,” said Randy Smallwood, president and CEO.

The company revealed that during its second quarter, it had net earnings of US$318 million, including a US$246-million gain on the disposal of the San Dimas silver stream.

Revenue increased year-on-year from US$200 million to US$212 million, despite a 6-percent decrease in silver ounces sold and a 3-percent decrease in average realized silver prices.

Aiding the rise in revenue for Wheaton was the increase in the company’s gold ounces sold, which rose 21 percent, while average gold prices climbed 3 percent.

In terms of production during the second quarter, the company garnered output of 6.1 million ounces of silver and 85,300 ounces of gold, representing a decrease of 15 percent and an increase of 7 percent, respectively, compared to Q2 2017.

Wheaton noted that the decrease in silver output and increase in gold production are attributable to the termination of the San Dimas silver purchase agreement and the creation of a new deal.

On May 10, First Majestic Silver (TSX:FR,NYSE:AG) announced that it had closed its acquisition of Primero Mining. In connection with the acquisition, Wheaton terminated the San Dimas silver purchase agreement and entered into a new agreement with First Majestic, resulting in the gain on disposal of US$246 million.

Also adding to Wheaton’s rise in earnings during its second quarter was the acquisition of two additional streams — one cobalt and the other gold-palladium.

Wheaton completed the acquisition of a cobalt stream on Vale’s (NYSE:VALE) Voisey’s Bay mine at the end of June, followed by the closing of a gold and palladium stream on Sibanye-Stillwater’s (NYSE:SBGL,JSE:SGL) Stillwater and East Boulder mines at the end of July.

“We expect Stillwater to contribute production and cash flow starting in the third quarter of 2018 and Voisey’s Bay starting in 2021. These additions ideally fit within our existing portfolio as they are both high-margin and long-life mines with significant exploration potential,” stated Smallwood.

With the addition of the streams on Voisey’s Bay and Stillwater, Wheaton’s estimated attributable production in 2018 is forecast to be about 22.5 million ounces of silver, 355,000 ounces of gold and 10,400 ounces of palladium.

Wheaton estimates that its average yearly attributable production over the next five years, including 2018, will be approximately 25 million ounces of silver, 385,000 ounces of gold, 27,000 ounces of palladium and, starting in 2021, 2.1 million pounds a year of cobalt.

As of 2:34 p.m. EST on Wednesday (August 15), Wheaton was down 6.48 percent, trading at C$24.38.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.